May 14, 2010

Toward an Accurate Portrayal of American Poverty

There’s been a lot of talk lately on the ins and outs of a new supplemental poverty measure being developed by the U.S. Census Bureau. As named, this new measure will not replace the official measure, but will supplement it by offering more information on people’s economic wellbeing. Nancy Folbre’s recent Economix post gives a good round up of why this new measure matters, but here’s the upshot. Unlike the official poverty measure, this supplemental measure will:

Take a more complete view of available income by including federal benefits and work supports (e.g., food stamps, EITC) and subtracting taxes, work-related expenses (e.g., transportation, child care), and out-of-pocket medical costs;

Measure income against a threshold that takes into account the costs of basic necessities, including food, clothing, shelter, and utilities;

Adjust for regional differences in the cost of living

In effect, this measure will give us a more accurate picture of how much people really have on hand to spend and what it actually takes to get by, whether you live in San Jose, Indianapolis, or McAllen.

Coming up with a measure of poverty that improves on the narrow and outdated thresholds we’ve been using since the 1960s is complicated task that has been a topic of debate for decades. This measure isn’t perfect either--and there are still issues to be ironed out--but it’s a big improvement and will help us look at things like how effective government programs and work supports are in helping people make ends meet. But there are two important caveats about this measure that are worth highlighting.

First, this measure isn’t a sure thing yet. It’s in the president’s FY2011 budget, which is an important first step. But there is still a budget proposal of $5 million for the Census Bureau and $2.5 million for the Bureau of Labor Statistics (a pittance by Washington standards) that needs to be approved to make this a reality.

Second, there is a limitation to the planned measure that will ultimately affect how useful it will be as a policy tool. Because the new measure will be based on the Current Population Survey, it will lack the sample size to produce these estimates below the state level (and it’s not even clear whether state-level estimates would be possible). That means that a measure designed to pick up differences in cost of living across rural Alabama versus San Francisco won’t actually tell you how many people in San Francisco are considered poor. Or for that matter, how many people in San Francisco aren’t considered poor because of work supports and safety net programs they were able to access.

There are people out there--in Wisconsin and New York City--working to create a similar supplemental poverty measure using the American Community Survey (ACS)--a survey with a much bigger sample size that would allow local level reporting. These efforts provide an important road map for moving forward, but to create a comparable measure across states and places will take leadership from the Census Bureau. For one, to get all the information needed to create this measure will mean adding or expanding questions on the ACS. If the Office of Management and Budget approved these changes today, that means they would finally appear on the ACS in 2018.

So if the Census waits on making the commitment to bring this measure below the state level, it will mean a delay of that many more years for researchers and policymakers before this measure is truly as rich and effective a tool as it has the potential to be.